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Budget 2014: 12 predictions
by Michelle McGagh on Mar 17, 2014 at 09:10
Savers have seen constant tinkering around the annual and lifetime allowances for pension contributions, which will decrease to £40,000 and £1.25 million respectively from April, that they are expected to be left alone.
McPhail said he wanted the government to begin increasing the lifetime allowance again after a series of cuts.
‘We would like to see a commitment to raise the lifetime allowance in future on an annual basis otherwise you might just as well tell the 30-somethings of today not to bother with pensions at all because they’ll be subject to 55% tax [the levy for saving more than the lifetime allowance] by the time they get to retirement,’ he said.
He said further erosion of the allowance, ‘even just by fiscal drag’ would eat into the ‘retirement aspirations’ of ordinary savers.
‘At today’s annuity rates, the lifetime allowance only allowed for an income of less than £45,000 a year; in 20 years’ time this could be just £25,000 a year,’ he said.
He added he would like to see an increase in the £3,600 pension contribution rate – which every person up to the age of 75 can invest into a pension each year and receive 20% tax relief on – to £5,000 as it has not been changed since it was introduced.
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